Auctions versus Negotiated Sale: Evidence from Real Estate Sales

YuenLeng Chow, Isa Hafalir and Abdullah Yavas ()

No 2012-E22, GSIA Working Papers from Carnegie Mellon University, Tepper School of Business

Abstract: We offer a theoretical and empirical comparison of auctions and negotiated sales. We first build a simple model to show that auctions generate a higher relative price than negotiated sales when demand for the asset is strong, when the asset is more homogeneous, and when the asset attracts buyers with higher valuations. Using data from property sales in Singapore, we find support for our theoretical predictions that the auction mechanism obtains a higher relative price in an “up market” than in a flat or down market, in the high-end segment of the property market, and for relatively homogeneous properties than heterogeneous properties.

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Journal Article: Auction versus Negotiated Sale: Evidence from Real Estate Sales (2015)
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